You can hear them before you see them. The steely clack of the widest lace looms in the world assaults the ears as you enter the building, their rhythmic racket sending the imagination screaming back to the darkest shadows of the 19th century. Through the gloom of the factory floor, you half expect to see a man in a frock coat and top hat, horsewhip in hand, inspecting the work of barefoot mill workers.

Open your eyes, though, ignoring the tiny cotton fibres that dance down the ages from the stringy space above, and you're jolted back to the future. We're at the last madras lace mill in the world, at Newmilns in the Irvine Valley, Ayrshire. All around are the signs of long-term decline - the windows are taped up and grimy, and the old concrete factory floor is cracked - but at the ripe old age of 106, the Morton, Young and Borland mill has found a new voice.

Replacing the heavy engineering of yesteryear, screeds of (fashionably pink) card, punched in dotty digital designs, scroll hypnotically above 20 antique looms. As they go, they make hundreds of yellow jacquard harness strings dance like marionettes over tightly strung yarns, lifting and dropping them in a mysterious, noisy union of waft and weft. It is one of the most enduring wonders of the textile world that from the mouths of these ancient looms emerge lengths of the most cutting-edge Nottingham and madras lace. The fabric is in demand by upscale interior retailers including Warners, Anna French, Colefax & Fowler, Laura Ashley and John Lewis - and also by the celebrated Glasgow-based design duo Timorous Beasties.

In many respects, Morton, Young and Borland (MYB) has changed little since being founded in 1900 as a manufacturer of "Scotch Leno Gauze Weave" alongside some 30 other lace mills in the Irvine Valley. This was at a time when Scottish lace for home furnishings was in huge demand worldwide, especially in India. Thanks to the expertise of refugees from Flanders and France, the area established itself towards the end of the 19th century as a thriving world-class exporter of lace, muslin and madras. However, a slow decline began in the 1920s when Mahatma Gandhi encouraged his followers in India to wear "homespun" garments rather than British-made textiles.

While other mills have closed, MYB has so far proved unique in moving with the times, embracing new technology and markets alike. A management buyout four years ago took the mill out of the hands of its founding family - although its new managing director, 37-year-old Scott Davidson, has worked at MYB since he left school. Now he and his young management team have embarked on a mission to conquer the world.

The company has already sought out new frontiers in the interiors market. With the widest looms in the world, at 12 metres, MYB is a major supplier of backcloths and screens to international film, opera and theatre companies. Its lace panels can be spotted in the Hollywood film Interview with the Vampire, starring Tom Cruise, and will appear in the upcoming Harry Potter film, Order of the Phoenix. The company has also just trialled a successful run of black lace, after discovering its popularity with customers of the designer Pearl Lowe (the girlfriend of Supergrass drummer Danny Goffey). She buys lace tablecloths and curtains from MYB, dyes them black, and sells them online and at Portobello Market in London. Jools Oliver, the wife of celebrity chef Jamie, recently bought a black lace curtain for her kitchen window - and a black lace madras backcloth, commissioned from MYB for the wedding

last December of rocker Marilyn Manson and burlesque model Dita von Teese, will feature in next month's issue of Vogue.

"Exposure like this is fantastic for us, " says the company's sales director John Glen, 34, who was born in Troon and brought up in Edinburgh, and has a business and marketing degree from Heriot-Watt University. "When your product is bought by the rich and famous, it proves the market for what you do is out there."

Sofar, so good. But Glen also has a more challenging goal for MYB in the 21st century and beyond: fashion. The company already works with Holland & Sherry, suppliers of luxury textiles to the fashion industry. Its clients include Kelly Hoppen, and it recently sponsored the graduation show of Shonagh Kay, the Edinburgh College of Art fashion designer who now sells her MYB lace frocks at the Corniche boutique in Edinburgh, and at Thistle & Broom in the US.

The recent installation of a GBP50,000 electronic jacquard - a machine that enables the swift production of highly complex patterns - has developed MYB's fashion potential further. More flexibility means shorter working times and a reduced sampling costs, meaning one-off bespoke orders are not a problem. "Fashion is a market we are ready to develop, " says Glen. "We aim to increase our fashion output from one to ten per cent in the next two years."

It's a daunting remit, but it makes sense. MYB's repositioning into mainstream fashion appears to be bang on trend: Prada, Miu Miu and Jean-Paul Gaultier are just some of the international designers showing white lace collections for the new season. A new website design and glossy brochure are being planned to reflect MYB's new-found confidence - and its first major fashion commission is a "Nina" vintage gypsy skirt for Polo Ralph Lauren's spring/summer 2006 Blue Label collection, which has just launched at a retail price of around GBP300.

John Glen is as far removed from a Victorian overlord as it's possible to be. In open-necked shirt and casual trousers, he enthuses about the intricacies of weaving the past with the future, and has a friendly relationship with MYB's 60 highly skilled staff. Also part of the company's refreshingly vibrant management team is Margo Graham - who, at the age of 40, is the only specialist Nottingham-lace designer in the world. She is also the first in-house designer the mill has ever had. Recruited in 1982 by the now-defunct Johnston Shields after taking higher art at nearby Loudon Academy, where she specialised in screenprinting, Graham served her apprenticeship in hand-painted lace design for seven years under the watch of John Dykes and Bert Faulds, who both retired at 70. Their long service was testimony to the fact that lace-making is a skill for life.

Graham stayed with Johnston Shields for 16 years, during which time she trained in computer-aided design. She joined MYB in 1999, when the company was still employing the services of hundreds of freelancers living locally and in Nottingham.

In addition to working to clients' own designs, Graham increasingly supplies her own. For inspiration she uses an archive of some 30,000 old MYB designs, and beautiful sample books salvaged from other local mills. In a dusty attic, which she hopes to convert into a fully fledged design studio, she shows me an original hand-painted Nottingham lace design addressed to a client in Glasgow, and stamped at Newmilns Post Office in February 1906. Only a decade ago, hand-painted designs took about a year to complete. Now, thanks to specialist software, they take mere hours.

Graham has been pivotal in fulfilling Ralph Lauren's order for the specially dyed, 95 per cent Egyptian cotton Nottingham lace skirt. Neither she nor Glen can conceal their excitement and pride as they unwrap a bale of the lace to show me. "They sent a copy of their own lace design, which they asked us to incorporate into a circular skirt with a deadline of just one week, " says Graham. "Their sample was drawn in a straight line, so I adapted it to fit a circular skirt. It was a case of trial and error."After only four attempts, Graham came up with an ingenious design of ready-to-cut dovetailed "pizza pie" sections on MYB's electronic loom.

Enough lace to make 1,050 skirts was sent out to Ralph Lauren's manufacturer in Hong Kong at the end of last year, and the Nina skirt was launched last week. "It was a lot of work, and a big learning curve for us, " says Glen, "but that's what we need if we are to develop as a company. It will be worth it. We will be able to use this as a springboard to attract more fashion clients. To increase our fashion output to ten per cent by 2008 is a challenge, to say the least - but that's what we must do if we are to rebrand."

Coloured cotton chenille madras is the next big thing in womenswear, and Polo Ralph Lauren have already expressed an interest in both this and one of MYB's heavy weaves. Margo Graham has been busy cutting design cards from which samples will be woven.

MYB's natural-fibre yarnbank also includes cashmere, lambswool, linen and silk, and the company also supplies lurex and viscose lace. "The fact we are introducing new yarns into our madras makes us much more fashion-led than we were before, " says Graham.

Glen and Graham are ensuring the future of MYB in another way: with an apprenticeship scheme to build up the design team. The company's first-ever assistant designer is Edinburgh-born Sherry Kirkpatrick, a 25-year-old graduate in printed textiles from the Scottish College of Textiles in Galashiels. She joined the company as a design apprentice 18 months ago, and uses customised computer software to produce madras lace designs. She is also training in Nottingham lace, a process which can take six or seven years. Design apprenticeships are as important as those in weaving, and it can take up to ten years to train completely.

The textile industry is notoriously vulnerable to changes in the worldwide economic climate, but Glen is upbeat. "The competition between lace manufacturers is keen, but our unique selling points are our history, our looms and our highly skilled staff, " he says. "We find that the way forward is to share our contacts with other textile companies in Scotland, and to continue to develop opportunities among ourselves.

"Our turnover may not be as high as it was, but our margins are much better. If we hadn't invested as we have, we would not be able to contemplate a future in fashion."

For more information about Morton, Young and Borland, visit www. mybtextiles. com.